Category: Funds

Despite a shaky performance over the past two weeks, LatAm fixed income assets remain attractive thanks to strong fundamentals for both corporates and sovereigns, PIMCO portfolio manager Adam Borneleit tells LatinFinance. “It’s hard to know where the pricing settles out in the short term, but fundamentally, [LatAm] is doing well,” says the investor, who helps manage more than $48bn in EM assets for the fund. Having pre-funded for the coming year, sovereigns are in a good position and can even consider buying back debt, adds Borneleit. Overall, internal dynamics in most LatAm countries are also solid, with strong domestic demand helping keep corporates, most of which have kept low leverage levels, also in good shape, says Borneleit.

ING is in talks to buy Banco Santander’s Chilean pension fund management unit, AFP Bansander, for around $500m according to local media in Chile. ING already owns AFP Santa María, one of the country’s largest pension funds and the acquisition of Banco Santander’s unit – the fourth largest in terms of AUM in the local market – means that the deal will come under close scrutiny from the country’s anti-trust regulator. Santander is also negotiating the sale of its other Latin American pension units in Argentina, Mexico and Colombia.

Goldman Sachs issued a bullish note on the Peru sovereign 30-year in PEN. “The sale of a 30-year bond in soles at a fixed rate and no inflation adjustment is a remarkable achievement for Peru, because it reflects strong confidence by the market in the country’s economic policies and long-term economic prospects,” says Goldman. “This is a reward for the adoption and maintenance of sound and prudent economic policies for a number of years.” Paying down some Paris Club debt will “improve Peru’s public debt profile in a meaningful way,” it adds. “The significant improvements in the public debt profile and credit ratios place Peru yet another step closer to earning investment grade credit status, which we believe could materialize during 2H2008 or 2009,” says Goldman.

Latin America equity funds took in another $442m last week, pushing year-to-date inflows past the $6bn mark, according to EPFR Global. This was the most since EPFR began tracking these funds on a weekly basis in 2001. Meanwhile, EM Bond Funds saw a 12 week winning streak come to an end as investors yanked $113m out.

Peru priced a benchmark 30-year PEN-denominated bond last week, raising well over the $1bn minimum it had established on the roadshow. The sovereign priced PEN4.750bn ($1.5bn) in 2037 bonds at par to yield 6.90%. Proceeds will pay down Paris Club debt, the members of which agreed to receive prepayments for $1.754bn worth earlier this month. The Peruvian government has approved a sale of up to $2.58bn worth bonds for Paris Club debt, indicating the possibility of further issuance down the road. Citi led the offer.

Peru and the City of Bogota are out with local currency offerings expected to be priced today, Thursday. Peru is doing a novel 30-year PEN-denominated bond with guidance in the 6.90% area, via Citi. Bogota has issued guidance in the 9.875% area on $300m worth of peso-denominated 21-year notes with amortization beginning in 2025, says a banker close to the deal. Citi and Deutsche are leading that issue.

Peru is set to offer at least $1bn equivalent in new PEN-denominated bonds this Thursday in a deal that establishes a series of milestones for the sovereign. The 2037 is the longest dated local currency deal from Peru and the sovereign’s first to get investment grade. On Friday, Fitch assigned a BBB minus rating to the 144A/Reg S notes. S&P, which last month updated its methodology to include split ratings, may also follow suit with a high-grade rating for the local currency bond. Proceeds are earmarked for paying down some $1.8bn in Paris Club debt. “With this bond, we’re establishing a 30-year benchmark, raising debt in local currency, which reduces our FX-exposure, and reducing our public foreign currency debt,” Marco Nieto, spokesman at the finance ministry tells LatinFinance. Citi is leading the offer.

EM debt funds saw $152m inflows in the week to July 11, according to EPFR Global. Funds dedicated to local currency or a mix of local and foreign currency accounted for $55m, less than in previous weeks. EM debt funds monitored by EPFR have just over 51% of their allocation in LatAm, mostly Brazil (16%). Returns for EM fixed income funds meanwhile, were 0.20% in the July 5-12 period, taking them to a 2.74% gain year-to-date, Lipper data shows. This is more than the 0.08% average for the week in fixed income and greater than the 1.22% rise for 2007 so far. According to EPFR, the cash position of EM funds fell to 4.2% at the end of May, from 5.5% the month before.

The Mexican government is introducing several amendments to the country’s pension law in an attempt to streamline the so-called Afores industry ahead of wider reforms said to be in the pipeline and to improve yields for clients. Some of the changes announced on Friday include a single commission regime, account transfer restrictions, tighter control of Afore chief executives and broader powers for pension fund regulator Consar.

California’s Public Employees’ Retirement System (CalPERS) has awarded EMAlternatives, an EM private equity fund, a $100 million mandate for private equity investment. The fund will customize investments for its clients by making primary fund commitments in private equity in EM, including Latin America, where EMAlternatives is reviewing opportunities, John Stephens, managing partner at EMAlternatives tells LatinFinance. “Our objective long term is to have six to 12 clients with between $1 billion and $2 billion under management,” says Stephens. This is the first mandate for the Washington and Amsterdam based fund, which formed in March.